Report into cost overruns at children's hospital identifies 'series of weaknesses'

The report into cost overruns at the National Children's Hospital has been published by the government.

The independent review carried out by PWC identified "a series of weaknesses in terms of set-up, planning, budget, execution, and governance" of the project.

The report, which was signed off on by Cabinet today, examined why the cost of the hospital more than doubled in a short space of time.

It found that an underestimation of the real cost of the project contributed to the "vast majority" of the €450m increases, while costs like VAT, delays and changes to regulation and building standards were also attributable factors.

The children's hospital could now cost more than €1.7bn after estimates in 2014 put the figure at €800m.

The review examined the option of re-tendering the project and found that it would likely have led to costs increasing even further or even the project not going ahead at all.

A statement from Department of the Taoiseach said the NCH "is a vital and much-needed project" and that "it is recognised that a programme of work of this nature can never be fully de-risked".

"Nevertheless, it is clear from the findings and recommendations that there were significant weaknesses which led to escalation of cost which only became known at far too late a point in the process," it said.

The review by PWC was carried out to establish the “sequence of events” which led to the spiralling costs, but will “stop short of determining culpability at the individual level”.

The accountancy firm issued nine recommendations in relation to the children's hospital project and two in relation to other capital infrastructure projects, all of which have been accepted by government.

    The recommendations regarding the NCH are:

    1. The project control environment should be overhauled to bring it up to the level of maturity and sophistication required for a project of the scale, complexity and importance of the NPH project;

    2. Comprehensive plans should be developed to mitigate the residual risks identified;

    3. A Project Assurance Strategy should be developed and implemented for the remainder of the NPH Project;

    4. The commercial capability and capacity of the NPH Executive should be strengthened so that it is more self-sufficient and less reliant on external advisors;

    5. The Executive of the NPH should be strengthened in the short term to support the planning and execution of the next phase;

    6. Consideration should be given to opportunities for the closer working of the NHPDB and the SHI Board. This should include the potential for some shared appointments to promote integration and to address skills gaps;

    7. The NHPDB should request confirmation of a number of key decisions in relation to the procurement / approach for medical, ICT and electronic health records to enable effective planning for the next phase of the programme;

    8. The scope and responsibilities of the advisory firms that constitute the Design Team should be reviewed to reflect their future roles;

    9. In view of the potential consequential programme risks, a scrutiny process that includes all levels of the governance structure should be put in place.

    The recommendations on other infrastructure projects are:

    10. The rules that govern public sector spending on major capital projects should be strengthened. The standards to which business cases must adhere should be more clearly defined and robustly enforced; and

    11. A central assurance and challenge function should provide consistent challenge to and review of major projects through their lifecycles.

Commenting on the publication of the review today, Taoiseach Leo Varadkar said it made for "grim reading".

“The PWC report makes grim reading. The report finds the escalating costs of the new National Children’s Hospital related largely to an underestimation of the cost of building it in the first place, as well as the cost of delays, higher building standards and the knock-on effect of VAT," he said.

"It does not recommend retendering as a feasible option and suggests there is little scope for savings.

“Our priority now must be to finish the job on time to meet the 2023 opening date, contain further cost increases and learn from the mistakes made in advance of other major projects like Metro and the National Broadband Plan," he said.

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